Quantity or quality? The impact assessment of environmental regulation on green innovation

Abstract

As technological progress aimed at realizing resource conservation and environmental protection, green technology innovation provides an important nudge for sustainable development. Is the Porter Hypothesis valid in China's environmental system? This paper's focus centers on the Clean Air Action Plan, the paradigmatic environmental regulation in China. Based on the patent data and classification, China's green innovation activities are measured from the two dimensions of quantity and quality. Using the regression control method, this paper assessed the policy effect of the Clean Air Action Plan on green technology innovation by constructing a counterfactual framework. The empirical findings indicate that environmental regulation has positively stimulated green innovation activities. However, regarding both statistics and economic magnitude, the positive impact on patent quality is significantly smaller than on patent quantity. Further analysis shows that policy effect is heterogeneous in different scopes: the quantitative and qualitative improvement is only embodied in green patents of waste management, which implies that innovation is concentrated on end-of-pipe treatment, with a pronounced path dependence in green innovation. This paper provides new micro-level evidence and theoretical support for exploring pathways to green transformation.